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Transportation costs and the spatial distribution of land use in the Brazilian Amazon

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We examine the question of whether reducing transport costs in the Amazon has lead to increased land clearing. Data on land clearing, transport costs and other related variables from 1975 to 1995 is analyzed using econometric approaches that exploit the dynamic time series dimension of the data to control for possible omitted variables and endogeneity. Our results suggest that the impact of changes in transport costs on clearing depends greatly on the initial land use. Specifically, we find that in regions where a greater proportion of the land is already cleared, reducing transport costs can lessen the rate of future clearing. On the other hand, reducing transport costs through areas that have seen little human activity is more likely to increase deforestation.